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ARCHIVE: GOVERNANCE AND CORPORATE SOCIAL RESPONSIBILITY

Strengthening Ethical Cultures in Organizations—After the Crisis

Michael Bassett, Senior Research Associate, Governance and Sustainable Enterprise
November 9, 2009

Recognizing that character and integrity issues lie at the heart of the global financial crisis, the Conference Board’s Corporate Ethics Management Council used the first anniversary of the collapse of the Lehman Brothers investment firm to discuss how organizations can reinforce an ethical culture. At their September 2009 meeting, the members of the council—senior executives responsible for ethics and compliance programs in 40 private and public sector organizations—developed a set of Top Ten Tips for Strengthening the Ethical Cultures in Organizations.

The council members compiled three unique Top 10 lists for 1) CEOs and boards of directors, 2) integrity leaders, and 3) senior managers. The tips go beyond the core elements of ethics and integrity programs—codes of conduct, ethics training, whistleblower protections, hotlines—and provide guidance to help these organizational leaders build more ethical cultures.

Top Ten Tips for Strengthening Ethical Cultures in Organizations: CEOs and Boards of Directors

  1. Engage a third party to survey employees regarding the ethical climate in the organization and to identify hot-button issues. The assessment of the ethical climate should be part of the performance discussions for both the CEO and his or her direct reports, and it should be shared and discussed with the board.
  2. Provide dialogue-based ethics training. Employees must be evaluated not only on what they achieve but also on how they achieve it, to ensure they are modelling the values of the organization.
  3. Model and demonstrate ethical behaviour. In particular, CEOs must visibly model ethical behaviour in their interactions with employees and external stakeholders, such as clients.
  4. Include ethics and integrity as part of the mission or values statement of the organization.
  5. Participate in broader policy discussions and industry associations—internationally, nationally, or locally—and bring an ethical dimension to these discussions when needed.
  6. Understand the organization’s ethics “heat map” and the organization’s ethical risk areas. Appoint a champion of ethics within the board and have an employee appointed as chief ethics officer who reports directly to the board or a committee of the board on a regular basis. 
  7. Have an enterprise risk framework that includes ethics and integrity measures. These elements can include inputs from employee surveys, reputational scans, conversations with regulators, internal and external audits, and issues that have come to management’s attention, such as regulatory issues, or product deficiencies that have to be fixed.
  8. Provide financial recognition for exceptional ethical behaviour and include ethics in performance appraisals. The baseline expectation should be that employees always take ethical considerations into account. The CEO should also hold his or her direct reports accountable for ethical missteps.
  9. Hold the CEO explicitly accountable for ethical decision-making and the ethical culture of the organization, and discuss expectations and achievements as part of the board’s annual evaluation of the CEO.
  10. Have the courage to be different and make hard choices when needed. Don’t follow the herd if you honestly believe it is misguided and going in the wrong ethical direction.

Top Ten Tips for Strengthening Ethical Cultures in Organizations: Integrity Leaders

  1. Focus on ensuring a strong ethical tone at the top. Ethics can’t only be words or guidelines.
  2. Conduct ethical risk assessments to identify inherent risks, gaps in ethics training, and differences in ethical risks among employee groups (by business line and demographically).
  3. Ensure that there is a thoughtfully developed code of conduct specific to your organization and its employees. Refresh the code as needed.
  4. Embed ethical decision-making in product and service discussions. Have high-quality products that reflect the ethical climate of the organization.
  5. Be visible within the organization and at the senior management table.
  6. Focus training on conflicts of interest. This training should be tailored to groups within the organization. Discuss potential conflicts of interest specific to their work.
  7. Ensure the ethics office reflects a positive psychology approach (focusing on the strengths and benefits of ethical behaviour) and the concepts of caring and carefulness. The ethics office should not be the “office of no” but should make the connection between ethics and competence, and between ethics and personal and professional reputation.
  8. Focus on how to keep ethics alive on an ongoing basis within the organization. Too often, there is not enough focus on what comes after the development of a code or employee sign-offs on the code.
  9. Recognize that the personal credibility of the integrity officer is paramount. This individual should be approachable and willing to help, and should be seen as a champion of ethical decision-making who raises ethical questions within the organization.
  10. Encourage organizational leaders to reflect on ethical decisions they have taken by acknowledging when they have rejected opportunities or business because they conflicted with individual or organizational ethics and values.

Top Ten Tips for Strengthening Ethical Cultures in Organizations: Senior Managers

  1. Be an ethics champion, lead by example, and set the tone at the top for employees.
  2. Set performance targets based on values and ethics, and ask employees how they have reflected the organization’s culture and values.
  3. Hold team discussions on the code of conduct that focus on building awareness of the code and identifying ethical risk areas for employees.
  4. Have the management team identify ethical risk hot spots for the organization.
  5. Circulate refreshers, articles, and studies on ethics in business to keep the code alive. Provide relevant case studies or examples of ethical dilemmas for discussion.
  6. Apply the rules for employees consistently. Don’t play favourites or allow some people to bend the rules “when the business calls for it”; that leads to the belief that all organizational rules are flexible.
  7. Focus on the positive dimensions of acting ethically and eliminate the negative connotations associated with ethical decision-making.
  8. Embed ethics dialogue in regular team meetings and performance reviews.
  9. Foster an open discussion of ethics issues through a regular (perhaps biweekly) reminder of ethics considerations, and provide a mechanism employees can use to raise ethical questions anonymously.
  10. Ensure that there is mandatory ethics training for employees.

Michael Bassett Michael Bassett
Senior Research Associate
Governance and Sustainable Enterprise

Executive Network
Corporate Ethics Management Council

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Strengthening Collaboration at the Intersection of HR and Ethics

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How to Ensure Ethics and Integrity Throughout an Organization
The Evolving Role of the Ethics and Compliance Officer